Middle Class Buyers Being Priced Out of Market

Daryl Fairweather, Redfin’s Chief Economist, said that its latest research indicates, “Homeownership is increasingly out of reach for the typical American.”

Redfin’s latest affordability research from 2017-2018 looked at the share of affordable listings that were available to households making a median income across 49 metro areas. Redfin’s conclusions? Less affordable housing is available today despite there being more housing inventory overall.

According to ATTOM Data Solutions Q4 2018 affordability report, home prices have reached the least affordable levels since Q3 2008. Redfin attributes lack of affordability to consistent y/y gains in home prices and rising interest rates.

Zillow’s research confirms that of Redfin and ATTOM Data Solutions. Zillow’s median home value was $223,900 in December 2018 (of course you’ve noticed that every research source has its own price points based upon its own data indicators), a +7.6% increase y/y. Essentially this rate of growth is unchanged from the same time period in 2016-2017 however, the pace of that growth is now slower.

For example, Seattle’s annual growth went from 12.4% through early 2018 to 5% in December 2018. San Jose’s home appreciation went from 16.8% in December 2017 to 9.9% in 12/2018.

Pay attention also to the percentage of people who can actually afford homes in metros experiencing decreased price growth rates and increased inventories. In Los Angeles, the price growth was only 3.9% in December 2018, according to Zillow, BUT, only 16% of the homes for sale in Los Angeles were affordable for middle class consumers. In Seattle, there were 4% more homes for sale in 2018 BUT there were -17% fewer affordable homes for sale.

ATTOM’s affordability report pointed to “silver linings” in local data that indicated home price appreciation was becoming more in line with wage growth. Those markets with increased percentages of affordable houses included…

Hartford CT – 19% increase in affordable homes

Jacksonville FL – 9% increase in affordable homes

Nashville TN – 4% increase in affordable homes

Louis MO – 84% increase in affordable homes***

Pittsburgh & Miami – 82% increase in affordable homes***

A silver lining from Redfin’s Fairweather is that she “…expects builders to shift their attention to more affordable homes in 2019 which, along with rezoning efforts by local governments, may help reduce the affordability pressure over time.”